New York City Agency and Vendor Bilked Medicaid, U.S. Says

Federal authorities have accused New York City officials of a five-year effort to defraud Medicaid, working with a contractor to exploit loopholes in Medicaid’s computerized billing system to collect reimbursements that amounted to tens of millions of dollars.

The office of Preet Bharara, the United States attorney for the Southern District of New York, said on Monday that the city’s Department of Health and Mental Hygiene and the contractor, Computer Sciences Corporation, created schemes from 2008 through 2012 that would produce reimbursements on tens of thousands of false claims for early intervention program services for infants and toddlers.

In one scheme, the city and the firm switched diagnosis codes on children, using a default code — 315.9, which designates an “unspecified delay in development” — that Medicaid would approve, the prosecutor’s office said.

Other schemes were intended to circumvent Medicaid rules that required the city and the computer firm to exhaust private insurance coverage before billing Medicaid, Mr. Bharara’s office said.

If the city did not have adequate insurance information from the patient, it would not make any effort to find the correct policy information, the office said. Instead, a computer program was created that would insert 999-999-999 as the purported policy number. Private insurers would quickly reject the claims, freeing the city to submit them to Medicaid.

The lawsuit, which follows a whistle-blower’s complaint, was filed under the False Claims Act. The lawsuit demands triple damages and penalties, but does not specify how much it is seeking. But in just one four-day period in April 2009, the lawsuit claims that the false diagnosis data was used on more than 600,000 claims, resulting in a $49 million payment from Medicaid to the city.

Mr. Bharara, in a statement, said that Computer Sciences Corporation and the city had “created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible and as much as possible.”

New York State joined in the whistle-blower lawsuit, making its claim only against Computer Sciences Corporation.

A spokesman for the city’s Law Department said the city had “cooperated fully” with the federal investigation.

“But we strongly disagree with the allegations, which we believe involve technical billing issues, not fraud,” the Law Department said. “The health department acted appropriately and all services billed were authorized and provided.”

Computer Sciences Corporation said in a statement that it had worked cooperatively with Mr. Bharara’s office over the last two years, and had also conducted its own review of the claims. The firm said that it would “vigorously defend itself.”

“We believe there is no factual or legal basis to support virtually all the allegations of which we have been made aware during the course of the inquiry, and that the complaint is without merit,” the company said.

The lawsuit mirrors a similar civil complaint filed by Mr. Bharara’s office in 2011. In that case, the city was accused of overbilling Medicaid by improperly approving 24-hour home care for thousands of patients. New York City eventually paid the federal government $70 million to settle that claim.

An error has occurred. Please try again later.

You are already subscribed to this email.

In announcing the lawsuit on Monday, the United States attorney’s office said that the fraud schemes outlined in the complaint were “part and parcel of a general practice at C.S.C. and the city to blatantly disregard their obligations to comply with Medicaid billing requirements.”

Medicaid typically pays reimbursements quicker than private insurers, and with fewer requirements. It also covered a larger share of early intervention services than the state’s own funds for such programs.

The complaint suggested that the fraud scheme was designed to serve the city’s and the company’s economic interests, noting that the city linked the amount of fees it paid to the amount of Medicaid payments the company obtained for the city.

Mr. Bharara’s office said in the lawsuit that when the former finance director of the city’s early intervention program was asked whether he had “schemed” with Computer Sciences Corporation to submit false claims to get Medicaid payments, he “repeatedly invoked his Fifth Amendment privilege.” The official was not identified in the suit.

The suit said that even before the computer firm was hired, the city official had made it a practice to submit claims using the default 315.9 diagnosis code, rather than the codes generated by service providers; he later asked the firm to use that code.

After April 2009, the suit says, Computer Sciences Corporation and the city continued to use the 315.9 code improperly. When the city and the company noticed that Medicaid had denied several hundred thousand early intervention claims because of invalid diagnosis codes, they revised a computer program to replace the invalid codes with the default 315.9 code in Medicaid claims.

The suit said that the computer firm was aware that it was submitting claims to Medicaid with diagnosis codes that “did not accurately reflect the diagnoses” for which the early intervention program “services were being rendered.”

The firm, based in Falls Church, Va., said in its statement that all eligible beneficiaries received the early intervention services to which they were entitled, and that the firm did not submit any claims to Medicaid for which the city “was not entitled to be paid.”

It said the city was “properly reimbursed for these services” and “Medicaid would have paid out the same amounts of funds” for the early intervention program “irrespective of any claims processing issues.”

The early intervention program provides services to children under 3 years old who have been found to have developmental delays or have been diagnosed with medical conditions, like autism and low birth weight, with a high probability of causing such delays, the lawsuit says.

The original whistle-blower suit was filed under seal in 2012, the document shows, by Vincent Forcier, who worked as a senior manager at Computer Sciences Corporation in its Kansas office, according to his LinkedIn profile. In April 2013, he went to work for H&R Block, the profile says. Under the law, Mr. Forcier could receive 15 percent to 25 percent of any recovery in the case.

Mr. Forcier declined to comment when reached by phone. His lawyer, Shelley R. Slade, said, “Mr. Forcier, in filing his suit, took on significant professional and personal risk, and I applaud his courage for standing up to do what he believed was the right thing.”

A version of this article appears in print on October 28, 2014, on Page A1 of the New York edition with the headline: City Is Accused in 5-Year Fraud Over Medicaid. Order Reprints|Today's Paper|Subscribe